Oil: The IEA aims to rebalance the market from Q2 2019

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The sharp drop in oil prices since the beginning of October has prompted the Organization of Petroleum Exporting Countries and its partners to take action to reduce the market's excess supply.

In its role as an additional regulator, the cartel and its partners, including Russia, have agreed on a joint production cut of 1.2 million barrels per day (mbd). The roadmap provides for quotas of around 800,000 mbpd for OPEC members, while the ten partner countries will have to cut their production by 400,000 mbpd.

While this agreement has made it possible to curb downside trends in the short term, it has to be said that the market has not been enthusiastic. This could result in operators being more concerned about the growth in demand for crude oil than about supply issues.

In its latest monthly report, the IEA is particularly optimistic, maintaining its forecast for growth in world oil demand at 1.4 mbd in 2019, i.e. a demand of around 100.6 mbd. At the same time, the Agency has lowered its production prospects due to production limitations and aims to rebalance the market from the second quarter of 2019.

Nevertheless, in the shorter term, there is uncertainty about the slowdown in global economic growth and the level of US crude oil stocks, which is barely declining despite the pace of US exports. Symbolically, the United States has exported more crude oil and petroleum products than it imports, the first time since 1991.

Graphically, in weekly time units, the configuration has weakened significantly since the $70 per barrel of Brent fell. The underlying trend thus appears bearish and sellers will keep their hands as long as prices remain below $62.5. However, support was provided at $59, which contained the sales assaults for the last four weeks. A break in this line would therefore be synonymous with a continuation of the downward trend towards $55.

The configuration is similar for WTI, where the prices find a buyer relay around $50. It will be necessary to close above $54 to start a technical rebound worthy of the name. On the other hand, a downward crossing of $50 would necessarily be accompanied by an extension of the downward movement, with a focus on the $43 zone.